UPDATE 2-Lululemon CEO to step down, stock slumps

TORONTO, June 10 (Reuters) - Lululemon Athletica Inc
, its fortunes dented by an embarrassing and
costly recall of excessively see-through pants, said on Monday
that Chief Executive Christine Day will step down once it finds
a replacement.

Lululemon shares slumped as much as 15 percent after the
news of Day's surprise departure, which came just three months
after the company's second major quality issue in less than a
year. Lululemon's chief product officer left in April.

"This was a personal decision of mine and, look, it's never
perfect time to leave a company that you love. I've had a great
run at Lululemon over the past five and-a-half years and I'm
really proud of what the team and I have accomplished," Day said
during a conference call with analysts.

Vancouver-based Lululemon carved out a lucrative niche with
its high-end, fashionable yogawear, building a reputation for
clothes that can withstand years of sweaty yoga classes and
hundreds of washes.

It has said the recall of the stretchy black pants could
cost up to $40 million profit this year, with most of the impact
coming in the second quarter. But it reported a slightly
better-than-expected first-quarter profit, as it brought its
top-selling pants back onto store shelves.

Lululemon said it was announcing Day's departure now so that
its board has time to conduct a thorough hunt for a replacement.

Day said in March that her team was "devastated" by the
recall. The company's Taiwanese supplier said it had followed
Lulu's specifications, and the retailer had apparently misjudged
customer tastes.
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